IS THE TRAINING OF HOST-COUNTRY WORKERS BY MULTINATIONALS ALWAYS DESIRABLE?

In this paper, we analyse the "direct investment v. export" decision of a multinational firm in competition with a potential entrant in a host country. We consider that there exists an asymmetry between the skills of workers from the host country and those of workers from the multinational's home country. We also give the multinational the possibility to choose and train a part of the hired workers when investing. We show that the low level of qualifications in the host country does not always compel the multinational to renounce direct investment. We also highlight that under the multinational's training assumption, the tariff-jumping investment can be welfare improving even if it excludes the local firm from the market.